Market Questions
Over the past couple of weeks we’ve had a lot of common questions from clients regarding everything going on. We wanted to address some of those for our viewers. One question we’ve had is, will the market stop and close for a few days and the answer is no. If the market closes, that would cause further worry and probably further selling. With the market staying open, it shows a lot of strength and is a good sign. The next question we’ve had has been about the Fed and what else they can do to help. The Fed has already done a lot. Just this morning, the Fed said they’ll be aggressively purchasing assets with no limit. They could also restart the lending programs to small businesses. Another thing they can do is offer banks greater access to cheap, longer term loans and broaden up the range of the financial firms who can borrow. They still have plenty of tools in their arsenal to help the economy grow. Another question was, when will we start seeing economic hits and reports about decline? This Thursday we’ll get the first view of the jobless claims. There’s 160 million people in the labor force. There are 17 million people in the hospitality industry and 51 million people in the retail industry. So, you have around 68 million people who are really seeing, in their companies and their businesses, slowdown and be impacted. We’ll start to see the hit on the economy with the jobless claims on Thursday. The first reading that we’ll see on GDP for the first quarter will not be until April 29th. There are certain sectors of the market that will get hit, but there’s also sectors that have employees working from home, still making a revenue and still producing products. They’re operating in a whole new different way. We’ll start to see, based on innovation, companies start to move forward because of the use of smart technology.
Passing the Bill
One of the areas we’re looking at closely is what’s happening in D.C. Over the weekend, the congressional bill failed a procedural vote. We still believe that this will be passed eventually and will bring relief to small and large businesses. Where this is an impact to the market is that it’ll free up funds and then go on to support corporations to keep people employed. There’s a portion of this bill that will offer loans that will be forgiven if you keep your payroll intact for two months or further. These kinds of congressional actions can really put a “batch stop” to this crisis from a business and market standpoint. The human impact will be hard to be handled by the Federal Reserve or Congress, but as far as the market impact, it will be very important as to where the Fed can come in and provide the liquidity needed. Typically, the equities bottom out well before the economy gets to the bottom because the equity market starts to price in. The light at the end of the tunnel may be when we pass this congressional bill. We can then discount backwards to the severity of the issues and start to look for optimism. In addition to that, when we see these negative economic numbers start to come out, if the market starts to rally or not be negatively impacted by those economic events, that’s telling you that they’re looking past the present and into the future. We believe that the future will be much brighter than what is happening right now. It’s good not to panic. We’re hoping to see some leadership out of Congress and that they will pass something soon. Once we have that bill, we’ll be able to read it. The devil will, of course, be in the details but no doubt only provides a lot of relief to a lot of areas of the economy and that will be important for the market. Historically, the average bear market is around 30% to 35%. That doesn’t mean that your portfolio is down that much, but it could very well, from a market from standpoint, indicate that we may very well be closer to the bottom and right now because we’re very close to that number. Every bear market ends well before the economy bottoms. We’re likely close to that to some extent.
Innovation
We want to make sure that our team members are healthy and able to continue to serve you. On top of that, we’re going to navigate through these historic markets. Winston Churchill once said that the Americans will always do the right thing once they have exhausted every other option. Well, here we are as America today, with the Coronavirus active and innovation in America hard at work. The innovation that’s going on is incredible. The United States has been able to move forward and look at different ways to approach this virus already. This morning one company announced that they’re going to be manufacturing up 100 million masks. One pharmaceutical rep said that his company is looking at 42 different options on how to treat COVID-19. Historically, there have been many dips in the market like the one we are going through. In 1987 when the stock market dropped, people were in a panic. The market’s a lot higher today than it was then, even with the trade back that we’ve seen recently. In 1990 and 1991 with Saddam Hussein’s invasion of Kuwait and the oil crisis that took place along with the SNL bailout, it’s still a lot higher than those times as well. The point is, innovation is alive and well and we’re closer to the bottom them than we think. The stock market will react favorably before the economy picks up. We’ve had conversations with clients who’ve talked about how horrible this is on the economy but if some type of preventative medicine can come out, a cure,or some type of government intervention that will help the economy, this market could correct favorably and positive long before the overall economy picks up. The market anticipates things to come. We’re seeing some incredible valuations out there in the market and we’re going to bring those to our clients’ attention as we go through this scenario. We can see this market rebounding. We don’t know the exact time and we don’t know when the bottom will hit but we do know that innovation is alive and well in the United States and we’re going to continue keeping you updated.
Stay in Touch
We want to make sure that every one of our clients out there is staying safe during this historic time. Through the years we have been committed to high tech, high touch, smart technology to be able to make sure that we still communicate with you. Our phone lines are open so that you can call our office with any questions you may have. We also have shareware to use where we can have an appointment with you and review your Financial Blueprint as well as your portfolio while you’re in the comfort of your home. If you’re working from home or if you’re retired staying at home and self-quarantined, we’re still capable and more than happy to have those conversations with you. We actually are meeting people for the first time through our shareware programs and through zoom to help those in need that don’t have a plan in place during this time and need one. It’s been an incredible experience for us meeting new people as well as spending time with our clients while they’re home. We are prepared to help you in every way that we can and keep you updated.
Greg Powell, CIMA®
President and CEO
Wealth Consultant
Email Greg Powell here
Bobby Norman, CFP®, AIF®
Managing Director
Wealth Consultant
Email Bobby Norman here
Trey Booth, CFA®, AIF®
Senior Vice President
Wealth Consultant
Email Trey Booth here
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.
Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.
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